Foreign Investors, Private Information, and Price Discovery
55 Pages Posted: 4 Oct 2010 Last revised: 27 Jun 2018
Date Written: June 20, 2018
We examine the relation between intra-day price discovery and proxies for financial openness and investor accessibility using a sample of intra-day price and quote data of 1,504 stocks from 23 emerging markets. We measure price discovery by weighted price contribution across seg-ments of the trading day. There is a reliable relation between price discovery in early trading and direct foreign ownership, controlling for other factors. A better legal environment is significantly related to the speed of price discovery. Foreign ownership and a better legal environment also lead to more informative prices at the opening of trading.
Keywords: Emerging Markets, Price Discovery, Weighted Price Contribution, Foreign Ownership, Market integration, Market Microstructure
JEL Classification: F30, F36, G10, G14, G15, G18
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